The Delaware Art Museum in Wilmington / ROBERT CRAIG/THE NEWS JOURNAL

by Margie Fishman, Wilmington (Del.) News-Journal

by Margie Fishman, Wilmington (Del.) News-Journal

WILMINGTON -- In a rare move, the Delaware Art Museum will sell as many as four works of art, valued at $30 million, to repay debt from a facilities expansion and replenish its endowment, museum leaders announced Wednesday.

He acknowledged that the decision could damage the museum's reputation nationwide, resulting in possible loss of accreditation and professional sanctions that would bar the museum in the short-term from loaning or borrowing works from other museums. The move could also hamper the century-old Delaware museum's efforts to recruit a new director.

"We're basically shunned for a period of years," he said.

Museum leaders declined to name the specific works that will be auctioned off within six months, but they said they were selected to have "minimal impact" on the museum's 12,500-piece collection. The sale could involve paintings and sculptures. The board has identified three works to be sold, Miller said, and could select a fourth from a short list if needed.

No work that was acquired through a gift or bequest â?? representing roughly 90 percent of the museum's collection â?? will be part of the sale, Miller said. That includes one of the museum's most iconic works, Edward Hopper's Summertime, which officials said could easily fetch $30 million on its own. The painting was donated in 1962 by the sister of Wilmington art collector John L. Sexton.

Housing the largest collection of British pre-Raphaelite art outside of the United Kingdom, the museum also boasts significant holdings from one of Wilmington's favorite sons, Howard Pyle.

Sixteen board members in attendance voted unanimously to approve selling the works, including Pyle's great-grandson, board vice president Roberts Brokaw III. Brokaw did not return a phone call late Wednesday.

Three trustees â?? board chairman Gerret Copeland, Paula Malone and Joshua Twilley â?? were absent. Copeland, a major donor, was traveling out of the country, but agreed with the decision, said Miller.

After losing its credit guarantee from Wells Fargo bank, the museum was faced with having to repay by October the full $19.8 million remaining on the bond, which would have nearly liquidated the museum's reserve fund.

To avoid that scenario, trustees had been working for a year on various refinancing options, an alliance or merger with another local arts institution, or restructuring the museum's operating model. None of those options proved viable, Miller said, given the museum's outstanding debt. Currently, the museum's operating deficit is $1.6 million, which represents more than 40 percent of its $4 million budget.

The museum also sought guidance from two professional associations: the Association of Art Museum Directors and the American Alliance of Museums. AAMD president Timothy Rub, who directs the Philadelphia Museum of Art, said he advised museum leaders to go public with their financial difficulties to rally support among private donors and legislators to restructure the debt.

Sale a last resort

Museum officials first learned in early 2013 that the bank had planned to withdraw its credit guarantee, Miller said, and leaders subsequently reached out to major donors with no success.

"We talked to every white knight we could think of," he said. "We didn't want to do it this way."

Museums regularly sell pieces in their collections to fund future acquisitions, a process known as "deaccessioning." The Delaware Museum has sold six works in the past decade through this practice.

But selling works to fund operating expenses or capital improvements is against AAMD and AAM guidelines, Rub said. It also contradicts the Delaware museum's collection policies.

"It's highly unusual for boards of trustees to take such a step," Rub said. "You can count the examples not even on one hand in recent memory."

Over the past decade, the AAMD has sanctioned only one museum â?? the National Academy Museum in New York â?? for selling two Hudson River School paintings in 2008 to pay its bills. Sanctions, which don't happen until after the sale is complete, can involve directing the AAMD's more than 230 members not to collaborate with the offending museum on exhibitions.

In the last two years, the Delaware museum has presented two traveling exhibitions, and loaned three mid-19th century pre-Raphaelite paintings to the Tate in London.

Miller, 63, is the museum's former part-time chief financial officer and former chief financial officer for DuPont Merck Pharmaceutical Co. He has no arts background. He has led the museum since former director Danielle Rice departed in August. After 8 years, Rice left to direct a new museum leadership graduate program at Drexel University.

While the board has dealt with the debt issue, the search for Rice's replacement has been put on hold, Miller said. He expects it to resume this fall.

Reached this week, Rice declined to comment on the art sale. The debt, she said, "was a struggle that was with me from the moment I started."

During her tenure, Rice helped raise $6.7 million as part of the museum's centennial campaign to rebuild its endowment. But that was still $3.3 million short of the goal. Donors, she said, were reluctant to give based on the museum's longstanding debt.

Asked if the museum would consider selling art again as part of a financial bailout, Miller replied: "Never again."

"We're taking care of the debt issue," he said. "We really think we're setting the [museum] up for the next 100 years.

How the museum got here

In 2005, the museum nearly doubled its size under a $32.5 million building project that was plagued with cost overruns and delays. To finance the expansion, the museum took out $24.8 million in tax-exempt bonds, which were expected to be paid in full by 2037.

But after the 2008 financial crisis, banks tightened their lending regulations. At the same time, the museum's endowment declined sharply from $33 million to a low of $21 million. Faced with a dropoff in corporate and private donations and at least a decade-long operational deficit, the museum cut staff. Arts institutions across the country have confronted similar budget constraints.

The situation became so dire that the Delaware Art Museum had to default on certain stipulations in its debt agreement, Miller said, such as maintaining a sustainable debt-to-earnings ratio. That prompted Wells Fargo to demand repayment sooner. The museum has paid $5 million toward the debt principal over the last three years, along with annual debt-service payments of more than $500,000.

"While the Trustees fully understand and respect museum best practices, we couldn't bear voting to close our beloved Delaware Art Museum," board president Elva Ferrari-Graham said in a statement. She did not return a phone call late Wednesday.

The board has promised to work tirelessly next year to rebuild the donor base, Miller said.

Founded in 1912 as the Wilmington Society of the Fine Arts, the museum was established by a group of Pyle's students, admirers and friends. They seeded it with 128 paintings from Pyle's studio, which were purchased from his widow. Pyle's distant cousin Dana Pyle still lives in north Wilmington. At age 88, he recently displayed at the Delaware museum a group of miniatures he created based on his celebrated ancestor's works.

Dana Pyle said he owns five original Pyle engravings and considered donating them to the Delaware Museum after he moved into a retirement home.

If the museum decides to sell any of Howard Pyle's works, "it would be a disaster," he said, adding that he would refuse to donate his collection.

"I would take my five Howard Pyles and find a place for them," he said. "I would keep those until the very last minute."